WEBVTT 00:00:00.486 --> 00:00:01.615 - So let's say that this house 00:00:01.615 --> 00:00:03.332 has been on the market for a couple of weeks, 00:00:03.332 --> 00:00:07.403 and the asking price is $310,000. 00:00:07.403 --> 00:00:08.815 And you say, well, you know this looks like 00:00:08.815 --> 00:00:10.070 the type of house, and you're in the market 00:00:10.070 --> 00:00:11.282 to buy a house, you say, "Hey this is 00:00:11.282 --> 00:00:13.252 "a type of house that I could imagine 00:00:13.252 --> 00:00:14.648 "me and my family living in. 00:00:14.648 --> 00:00:16.116 "I would like to buy this house." 00:00:16.116 --> 00:00:17.416 But you think, you know this price 00:00:17.416 --> 00:00:19.115 has been on the market for a couple of weeks. 00:00:19.115 --> 00:00:20.866 Maybe I think I could get a better deal than this, 00:00:20.866 --> 00:00:23.665 so you decide to make an offer. 00:00:23.665 --> 00:00:26.866 You decide to make an offer for, 00:00:26.866 --> 00:00:31.332 let's say, a little bit less, for $300,000. 00:00:31.332 --> 00:00:33.348 So the question is, how do you go, 00:00:33.348 --> 00:00:35.436 or how does your agent go about 00:00:35.436 --> 00:00:38.678 actually making an offer? 00:00:38.678 --> 00:00:40.031 Well, the way it goes is, you don't just 00:00:40.031 --> 00:00:42.998 walk up to the seller, or the seller's agent, 00:00:42.998 --> 00:00:45.698 and say, "Okay, we're gonna offer you $300,000," 00:00:45.698 --> 00:00:48.303 because they don't know whether you're serious. 00:00:48.303 --> 00:00:49.666 They don't know whether you actually 00:00:49.666 --> 00:00:52.081 have the money to do it, whether you are 00:00:52.081 --> 00:00:54.148 in a position to do it, or whether you're just 00:00:54.148 --> 00:00:57.616 kind of playing around, or just wasting their time. 00:00:57.616 --> 00:00:59.597 And so, to prove that you're not wasting their time, 00:00:59.597 --> 00:01:03.005 you create, or you fill out, 00:01:03.005 --> 00:01:05.561 an offer contract. 00:01:06.500 --> 00:01:08.097 So let's think about what should go, 00:01:08.097 --> 00:01:11.555 or what might go in an offer contract. 00:01:16.279 --> 00:01:21.169 So, likely your agent, if you're using an agent, 00:01:21.169 --> 00:01:22.919 or even a real estate attorney, 00:01:22.919 --> 00:01:25.567 or you could even find some of these forms on the web, 00:01:25.567 --> 00:01:28.451 you would create a contract, 00:01:28.451 --> 00:01:31.233 and there's some basic information that you would want. 00:01:31.233 --> 00:01:33.867 You would obviously want info, 00:01:33.867 --> 00:01:36.412 info on the property, 00:01:36.412 --> 00:01:39.419 what's its address, the property, 00:01:39.419 --> 00:01:42.523 who's buying, yourself, 00:01:42.523 --> 00:01:45.583 so the buyer and the seller, 00:01:45.583 --> 00:01:46.751 this is just to kind of know, hey, 00:01:46.751 --> 00:01:48.201 what is this contract about? 00:01:48.201 --> 00:01:49.300 It's about this property, 00:01:49.300 --> 00:01:52.766 and who's getting into this contract, 00:01:52.766 --> 00:01:53.800 and then you'd want to put some 00:01:53.800 --> 00:01:56.468 information about the actual offer, 00:01:56.468 --> 00:01:59.284 so, you would put your offer in. 00:01:59.284 --> 00:02:03.668 You'd say, "Okay, I'm going to offer $300,000." 00:02:08.084 --> 00:02:09.368 And then you also want to prove that, look, 00:02:09.368 --> 00:02:11.869 you're not just playing around with them, 00:02:11.869 --> 00:02:13.251 that you're serious about this. 00:02:13.251 --> 00:02:17.229 This offer is made in earnest, and so you will 00:02:17.229 --> 00:02:20.315 give a deposit when you make this offer contract, 00:02:20.315 --> 00:02:23.171 or it's typical to give a deposit, 00:02:23.986 --> 00:02:24.865 and it will vary. 00:02:24.865 --> 00:02:26.283 The higher the deposit, the better, 00:02:26.283 --> 00:02:28.514 because it shows the more earnest you are, 00:02:28.514 --> 00:02:30.617 the more serious that you are about actually 00:02:30.617 --> 00:02:32.664 going through with this offer contract. 00:02:32.664 --> 00:02:35.883 It's typical for these deposits to be anywhere between, 00:02:35.883 --> 00:02:38.449 I've seen one percent, two percent, three percent, 00:02:38.449 --> 00:02:41.483 four percent, five percent of the actual home price. 00:02:41.483 --> 00:02:43.831 Three percent is what I'm most familiar with, 00:02:43.831 --> 00:02:45.083 but it doesn't have to be three percent. 00:02:45.083 --> 00:02:47.865 It's really, this is just an indicator to the seller 00:02:47.865 --> 00:02:49.304 that you're serious about this. 00:02:49.304 --> 00:02:51.232 So you're gonna write a check right now, 00:02:51.232 --> 00:02:53.005 along with the offer contract, 00:02:53.005 --> 00:02:55.565 for let's just say three percent of the offer price. 00:02:55.565 --> 00:02:58.209 So three percent of $300,000 00:02:58.209 --> 00:03:03.182 is $9,000, that's a $9,000 check. 00:03:03.182 --> 00:03:04.714 Some places, it's not a percentage, 00:03:04.714 --> 00:03:06.649 some people say, "Okay, you just give $1,000, 00:03:06.649 --> 00:03:09.049 "or give $2,000," whatever it is. 00:03:09.049 --> 00:03:11.649 But this money, once again, this is a check 00:03:11.649 --> 00:03:13.664 that you're writing with the offer contract. 00:03:13.664 --> 00:03:16.149 This shows that you are serious about this, 00:03:16.149 --> 00:03:17.900 that if for whatever reason you don't meet 00:03:17.900 --> 00:03:21.098 your end of the contract, then the seller 00:03:21.098 --> 00:03:23.331 might be able to just keep this money, 00:03:23.331 --> 00:03:28.072 so this shows that you are serious. 00:03:28.533 --> 00:03:31.534 This shows that you are serious right here, 00:03:31.534 --> 00:03:32.965 that they should take you seriously, 00:03:32.965 --> 00:03:35.116 and that they should go through the process 00:03:35.116 --> 00:03:39.415 of trying to close on this property, 00:03:39.415 --> 00:03:42.670 and we'll talk in future videos more about what closing is. 00:03:42.670 --> 00:03:43.865 Now, you're probably thinking, "Okay, look, 00:03:43.865 --> 00:03:45.803 "I'm just not gonna buy this outright. 00:03:45.803 --> 00:03:47.566 "I've toured the home, I like it. 00:03:47.566 --> 00:03:49.065 "I like the neighborhood, it seems to be 00:03:49.065 --> 00:03:51.248 "in good condition, but I don't know for a fact 00:03:51.248 --> 00:03:52.181 "that it's in good condition, 00:03:52.181 --> 00:03:54.381 "unless I have a chance to inspect it, 00:03:54.381 --> 00:03:56.900 "unless I have a chance to get some experts in there 00:03:56.900 --> 00:03:59.613 "and make sure that the house is in good condition." 00:03:59.613 --> 00:04:02.232 And to make sure of that, it's typical 00:04:02.232 --> 00:04:06.845 to throw some contingencies in your offer contract. 00:04:10.570 --> 00:04:12.767 Now, the most typical contingencies 00:04:12.767 --> 00:04:16.546 are things like inspections, so you might want to 00:04:16.546 --> 00:04:20.537 inspect for termites, you want to inspect the foundation, 00:04:20.537 --> 00:04:23.428 you want to inspect the plumbing, the electrical, 00:04:23.428 --> 00:04:25.296 and make sure that it's all on the up and up. 00:04:25.296 --> 00:04:27.579 If something comes up in the inspection 00:04:27.579 --> 00:04:30.326 that makes this house not what you thought it was, 00:04:30.326 --> 00:04:33.124 it allows you to get out of this contract, 00:04:33.124 --> 00:04:35.834 and hopefully get your deposit back. 00:04:35.834 --> 00:04:36.955 Now, other things that you might want to 00:04:36.955 --> 00:04:39.325 put a contingency on, well you think that 00:04:39.325 --> 00:04:41.275 you're going to be able to get $300,000. 00:04:41.275 --> 00:04:43.859 Maybe you have saved enough for a deposit. 00:04:43.859 --> 00:04:45.424 You've saved, let's say 20 percent of this, 00:04:45.424 --> 00:04:48.474 so you have saved say, $60,000, 00:04:48.474 --> 00:04:51.242 or maybe you've saved 70 or 80 thousand dollars, 00:04:51.242 --> 00:04:53.892 'cause you also need some extra money for closing costs, 00:04:53.892 --> 00:04:55.441 and whatever else, and we'll talk about that 00:04:55.441 --> 00:04:57.458 in future videos, and maybe to buy furniture, 00:04:57.458 --> 00:05:00.491 whatever else, so you've saved 70 or 80 thousand dollars, 00:05:00.491 --> 00:05:03.058 but the remainder of it, you're going to need to borrow. 00:05:03.058 --> 00:05:04.390 And you're going to need to borrow it from a bank. 00:05:04.390 --> 00:05:05.808 The bank has written a letter to you saying, 00:05:05.808 --> 00:05:08.259 "Hey, based on your income and your credit score, 00:05:08.259 --> 00:05:11.858 "we feel we have pre-approved your loan, 00:05:11.858 --> 00:05:13.775 "we think you're going to get the loan." 00:05:13.775 --> 00:05:16.441 But that's not the same thing as actually getting the loan. 00:05:16.441 --> 00:05:18.992 Something might happen, the bank might realize 00:05:18.992 --> 00:05:20.540 that they didn't notice something about you, 00:05:20.540 --> 00:05:22.691 or the financing conditions might change 00:05:22.691 --> 00:05:24.741 in between the time that you got your pre-approval 00:05:24.741 --> 00:05:27.660 and the time that you actually need your loan. 00:05:27.660 --> 00:05:29.540 So another typical contingency that you might have 00:05:29.540 --> 00:05:31.776 is a financing contingency saying, 00:05:31.776 --> 00:05:34.224 "Look, I really do want to buy this house, 00:05:34.224 --> 00:05:36.358 "but I'm clearly not going to be able to buy it 00:05:36.358 --> 00:05:38.841 "unless I get some financing." 00:05:38.841 --> 00:05:40.575 And then other things that might be there 00:05:40.575 --> 00:05:43.077 are things like insurance. 00:05:43.077 --> 00:05:45.540 Why would you need a contingency on insurance? 00:05:45.540 --> 00:05:47.207 Now this one's less typical, 00:05:47.207 --> 00:05:48.742 so I'll put a little asterisk there. 00:05:48.742 --> 00:05:52.075 Well, there might be a place that has a lot of floods, 00:05:52.075 --> 00:05:53.441 and the old owner had flood insurance 00:05:53.441 --> 00:05:54.608 just because they already owned it, 00:05:54.608 --> 00:05:57.041 but now the insurance companies aren't issuing 00:05:57.041 --> 00:05:59.257 new insurance, because it's so prone to flooding, 00:05:59.257 --> 00:06:00.325 or something like that, 00:06:00.325 --> 00:06:02.570 so flooding insurance might be there. 00:06:02.570 --> 00:06:05.992 There's a clear title, is obviously something 00:06:05.992 --> 00:06:10.075 that you would need if you wanted to buy this house, 00:06:10.075 --> 00:06:12.025 or that you probably should need, 00:06:12.025 --> 00:06:14.724 and once again there's other videos on that. 00:06:14.724 --> 00:06:17.044 So these are all things that if, for whatever reason, 00:06:17.044 --> 00:06:21.241 if these things fall through, it allows you to unwind it. 00:06:21.241 --> 00:06:23.410 Now if you're in a really hot real estate market, 00:06:23.410 --> 00:06:25.441 where there's many, many people bidding 00:06:25.441 --> 00:06:27.908 on the same property, and some of them are coming 00:06:27.908 --> 00:06:30.841 with really juicy offers, 00:06:30.841 --> 00:06:32.576 where maybe they're offering to pay it in cash, 00:06:32.576 --> 00:06:33.874 or they're offering other things, 00:06:33.874 --> 00:06:38.425 then it's not atypical to have fewer contingencies, 00:06:38.425 --> 00:06:40.441 because, remember, from the seller's point of view, 00:06:40.441 --> 00:06:44.108 they want the most serious buyer, 00:06:44.108 --> 00:06:46.908 and if someone is willing to waive their contingencies, 00:06:46.908 --> 00:06:48.707 they're like, "Hey, look, I know this is crazy, 00:06:48.707 --> 00:06:51.103 "but I'm just willing to get the house 00:06:51.103 --> 00:06:53.026 "in whatever condition it is," 00:06:53.026 --> 00:06:55.359 that's a lot more attractive to the seller, 00:06:55.359 --> 00:06:58.110 because the seller feels good that the transaction 00:06:58.110 --> 00:07:00.741 won't fall through because of one of these things. 00:07:00.741 --> 00:07:02.957 But that's in a very, very, very hot real estate market. 00:07:02.957 --> 00:07:04.525 In a more typical real estate market, 00:07:04.525 --> 00:07:06.840 I suggest you talk to people, realtors, 00:07:06.840 --> 00:07:07.475 other people in the industry, 00:07:07.475 --> 00:07:09.641 to figure out what's going on in your market. 00:07:09.641 --> 00:07:11.858 It's more typical to have stuff like this, 00:07:11.858 --> 00:07:16.401 especially the inspections, the financing, and the title. 00:07:16.401 --> 00:07:17.576 Now, the last part of it, 00:07:17.576 --> 00:07:19.525 and I'm glazing over a lot of details, 00:07:19.525 --> 00:07:20.992 in future videos, we might actually look at 00:07:20.992 --> 00:07:22.641 an actual offer contract, 00:07:22.641 --> 00:07:25.567 you would want to throw out the closing date. 00:07:28.675 --> 00:07:30.584 So it may be this offer contract, 00:07:30.584 --> 00:07:33.784 let's say it's made on 00:07:33.784 --> 00:07:38.664 October 15th of 2015, 00:07:38.664 --> 00:07:40.284 and let's say that you want to close, 00:07:40.284 --> 00:07:42.100 so that you want all of this stuff to get done, 00:07:42.100 --> 00:07:44.418 and you actually want to get the seller 00:07:44.418 --> 00:07:46.618 the whole amount of the money, 00:07:46.618 --> 00:07:48.784 and you want to get the title to the house, 00:07:48.784 --> 00:07:50.901 let's say you want to have it in two months, 00:07:50.901 --> 00:07:55.803 so 12/15/2015. 00:07:55.803 --> 00:07:58.784 And once again, from a seller's point of view, 00:07:58.784 --> 00:08:01.517 the closer in this closing date, the more that they 00:08:01.517 --> 00:08:04.683 feel good that this transaction is actually going to happen. 00:08:04.683 --> 00:08:07.571 So if you wanted to make a very tempting offer to a seller, 00:08:07.571 --> 00:08:10.668 you would have as few contingencies as possible, 00:08:10.668 --> 00:08:13.217 and you would make this closing date as soon as possible, 00:08:13.217 --> 00:08:15.967 but if it's not a super-hot real estate market, 00:08:15.967 --> 00:08:18.133 you don't need to go through all of that trouble, 00:08:18.133 --> 00:08:20.668 and it's fairly prudent to get inspections, 00:08:20.668 --> 00:08:22.551 and have contingencies on all of these, 00:08:22.551 --> 00:08:25.001 or things like this, not necessarily all of them, 00:08:25.001 --> 00:08:27.054 but things like this.